Maybe Debt Relief Won’t Help Poor Countries After All

by Julian Ku

The results of this new study about the ineffectiveness of international aid to certain developing countries is not surprising, but it is still depressing.

For years, the international community has forked over billions in health aid, believing the donations supplemented health budgets in poor countries. It now turns out development money prompted some governments to spend on entirely different things, which cannot be tracked. The research was published Friday in the medical journal Lancet.

Experts analyzed all available data for government spending on health in poor countries and the aid they received. International health aid jumped from about $8 billion in 1995 to almost $19 billion in 2006, with the United States being the biggest donor.

Most countries in Latin America, Asia and the Middle East doubled their health budgets. But many in Africa – including those with the worst AIDS outbreaks – trimmed their health spending instead. In the Lancet study, for every dollar received from donors, poor countries transferred up to $1.14 originally slated for their health budgets elsewhere. The research was paid for by the Bill & Melinda Gates Foundation

Moreover, debt relief for many countries is unlikely to have a positive effect either, the study suggests.

Murray’s paper also found debt relief had no effect on health spending. Activists like Bob Geldof and Bono have long argued canceling African debts would allow countries to spend more on their health problems, but there was no evidence of that.

“When an aid official thinks he is helping a low-income African patient avoid charges at a health clinic, in reality, he is paying for a shopping trip to Paris for a government minister and his wife,” said Philip Stevens, of the London-based think tank International Policy Network. He was not linked to the study.

3 Responses

This is an important study, and confirms something that other researchers have been tracking for quite a while. Leave aside the debt forgiveness piece of it, and focus on the biggest picture of what happens to aid funds. Money is fungible, and if you want it not to be fungible, there will be an enormous agency and monitoring cost to ensure that it doesn’t simply substitute for rather than increase, as intended, the overall health budgets. Institutions matter, in large part because agency and monitoring matter.

4.10.2010
at 1:32 pm EST Kenneth Anderson

I was intrigued by this and checked out the Lancet article. The important thing seems to be that contrary to expectations in some quarters, health development aid is not additive when channeled through government (although it seems to be closer to additive when channeled through civil society organizations and NGOs). As the authors explain, this is not altogether surprising, for a great number of reasons, including capacity to absorb aid, conditions imposed by foreign actors, among others.

Moreover, the fact that health development aid is not being added to health budget, but rather used to fund other public services is not in itself necessarily bad: “… we would need to know on what the resources taken from the budgets of ministries of health are spent. These funds could be going to education, infrastructure development, poverty alleviation, or various other underfinanced programmes that improve health.” It’s the old fungibility of money problem.

But unsurprisingly, and this is a common theme in development economic research, data is not available in enough quantity or quality to clarify where the money is actually being spent. Consequently, the first of five recommendations made in the article is to improve data collection, and establish clearer reporting standards on health expenditure, internationally.

Interestingly, the authors conclude by pointing out that their finding of subadditionnality raised the possibility of decreased support for health development aid: “A response to this concern could be to suppress these findings. For three reasons, we believe that these results warrant broad scientific and policy debate. First, a core principle of science is to follow the evidence and not publish selectively. Second, there are firm actions that can be taken to enhance the general trend toward increasing budgets for health even in the presence of major inflows of [Development Assistance for Health]. Third, addressing subadditionality in the health sector can in the near term lead to improved understanding of the issue, and policy changes to ensure future increases in public financing of health.” This sound like an eminently reasonable approach to the issue.

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